U.S. LLC’s Alone Owner’s Taxation in Japan

Hello, my name is Taisei Koshida, and I am a certified public accountant and tax accountant.

I aim to assist non-Japanese business owners who need help with reading or writing in Japanese. If you find the Japanese tax return system challenging, I can help you with your tax filings.

When you have a U.S. LLC alone and live in Japan, this taxation in Japan is rather complicated.

1. Permanent Establishment Taxation Risk

Now that you live and work for your LLC in Japan, it is possible to consider the LLC to have a Permanent Establishment there. If so, the LLC must pay taxes in Japan. If you pay enough director’s fees to you to such an extent that the LLC is break-even, the risk might be low because there is less merit to a tax office. However, the definition of director’s fees is strict in Japan, such as being unable to change in the middle of the fiscal year, so you should be careful.

2. Foreign Tax Deduction for Remittance Taxation in Japan

The U.S. LLC alone owner is not considered a director of the Japan-U.S. tax convention. So, U.S. taxes for director’s fees via working in Japan cannot be deducted from Japanese taxes on remittance taxation. This means that you must pay taxes in Japan and refund taxes in the U.S.

For more details about remittance taxation, please take a look at this blog.

Tax Considerations When a Non-Resident Becomes a Non-Permanent Resident in Japan

3. How U.S. LLC Taxed in Japan

According to Japanese tax law, money withdrawn to an owner from an LLC bank account is considered dividend income in Japan when an LLC is considered a corporation. Supposing you are a non-permanent resident in Japan, you are taxed when you send money from the U.S. You can reduce these taxes to some extent by applying a foreign tax deduction in Japan.

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